Circular Merger

DEFINITION of 'Circular Merger'

A transaction to combine companies that operate within the same general market but offer a different product mix. A circular merger is one of the three types of mergers, the other two types being vertical and horizontal mergers. A company engages in a circular merger to offer a greater range of products or services within their market.

BREAKING DOWN 'Circular Merger'

A circular merger can be risky if the acquiring company does not have specific expertise within the targeted market segment. Sometimes, expanding offerings too far from the company's expertise can lead to greater inefficiency, rather than the economies of scale that are often hoped for. However, the acquiring company can benefit from economies of scale and the sharing of distribution channels.

RELATED TERMS
  1. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
  2. Vertical Merger

    A merger between two companies producing different goods or services ...
  3. Merger Of Equals

    The combination of two firms of about the same size to form a ...
  4. Merger Mania

    A period of time with significant merger and acquisition activity ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. SEC Form 425

    The prospectus form that companies must file to disclose information ...
Related Articles
  1. Economics

    What's a Horizontal Merger?

    A horizontal merger occurs when companies within the same industry merge.
  2. Economics

    The Merger: What To Do When Companies Converge

    Mergers occur when it’s beneficial for two companies to combine business operations. The question is; if you’re invested in a company that’s involved in a merger, will it benefit you?
  3. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  4. Personal Finance

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller. We tell you what to look for.
  5. Term

    What's a Vertical Merger?

    A vertical merger occurs when two companies that produce goods or services for the same finished product merge operations.
  6. Investing

    A Guide To Spotting A Reverse Merger

    This corporate action can be profitable for investors who know what to look for.
  7. Investing

    What's a Merger?

    Mergers are not the same as acquisitions. In an acquisition, one company buys and subsumes another company, leaving only the buyer in place. In most mergers, both companies merge to form an entirely ...
  8. Investing Basics

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  9. Options & Futures

    Reverse Mergers: The Pros And Cons

    Reverse mergers can provide excellent opportunities for companies and investors, but there are still some downsides and risks.
  10. Investing News

    Office Depot and Staples Merger: What You Need to Know (SPLS, ODP)

    A major office-supply company merger is now in the works between Office Depot and Staples. First attempted 18 years ago, will this time be the charm?
RELATED FAQS
  1. How long does it take for a merger to go through?

    Corporate mergers and acquisitions can vary considerably in the time they take to be completed. There are a number of individual ... Read Answer >>
  2. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    Learn about mergers and acquisitions and how these two corporate actions differ based on the size and participation of the ... Read Answer >>
  3. How does the Circular Flow Of Income model work?

    Learn about the circular flow of income model used by economists to represent the continuous, interdependent nature of money ... Read Answer >>
  4. How can I develop a profitable merger arbitrage strategy?

    Learn how to utilize a simple merger arbitrage trading strategy to profit from the typical temporary price discrepancies ... Read Answer >>
  5. What is the difference between a merger and an acquisition?

    Read about the legal and practical differences between a corporate merger and corporate acquisition, two terms often used ... Read Answer >>
  6. What is the difference between a merger and a takeover?

    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center